Growth in the custody industry that holds virtual assets (coins) for corporations and institutional investors is slowing as the rollout of a system allowing them to trade virtual assets is delayed.
According to the virtual asset industry and police on the 17th, the Korean National Police Agency has commissioned services three times since Nov. last year to find a company to store virtual assets confiscated or collected for forfeiture after being used in crimes. Police are keeping seized virtual assets in exchange wallets or physical storage devices (USB). There has been strong criticism that a custodian is needed because private keys for accessing wallets must be managed. Police preserved 134.4 billion won worth of virtual assets through confiscation and forfeiture from Jan. to Sept. last year.
Police are having difficulty selecting a company. Some companies offered to provide services, but they failed to meet the conditions presented by police. Police wanted a firm authorized by the financial authorities that can store virtual assets in an internet-disconnected wallet (cold wallet) and fully compensate for any losses of virtual assets in custody.
A total of eight custodians have received business authorization from the financial authorities, and KODA holds more than an 80% market share.
Some custodians are reportedly struggling with management difficulties. Custodians must provide services to corporate and institutional investors, but listed companies cannot open company-name accounts on domestic exchanges to trade virtual assets. As custodians fail to generate revenue, a vicious cycle of constrained investment is repeating.
The financial authorities said in Feb. last year they would allow listed companies and professional investors to trade virtual assets for investment and financing purposes. They planned to first implement this for about 3,500 entities in the second half of last year. But the launch of the new administration and controversy over a reorganization of the financial authorities caused disruptions.
The virtual asset industry argues that corporate transactions should be allowed as soon as possible. The logic is that the market must grow through corporate transactions for the won-denominated stablecoin and virtual asset exchange-traded funds (ETF) to take hold. A virtual asset industry official said, "It is hard to find anywhere in the world that blocks corporate transactions."